Friday, February 15, 2008

Russia Creates a $32 Billion Sovereign Wealth Fund - New York Times

Things have changed since the early 1990s, when Russia desperately sought, but found very little, international investment in its collapsed economy. Russia doesn't have the largest sovereign wealth fund (think countries like Singapore, the UAE and Saudi Arabia), but with a relatively small population (and one that's getting smaller, not larger, as is the case in these other SWF countries) and vast natural resources (not just oil, but gas, timber, and minerals), Russia is uniquely positioned to exert long-term financial influence on other countries. The gist of this article is that the Russian Federation has divided its Sovereign Wealth Fund into two distinct entities: One as a longterm hedge against a fall in oil prices (a fall that most people think will never happen). That fund is roughly equal to 10% of the countries GDP (the total worth of goods and services produced in a county). The other, $32 billion dollars, will be invested in foreign investments, public and private. That's a serious chunk of change, roughly the assets of the largest US hedge funds.

MOSCOW — Russia has split its oil proceeds into two funds and cleared the way for one to invest in foreign stocks and bonds, officials said Thursday. But actual investments are not expected to begin until fall at the earliest.

The move sets up an investment pool with $32 billion, rivaling big American hedge funds and offering another sign of the dizzying wealth these days of oil-producing countries like Russia."

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